When it comes to the cost of rooftop solar Colorado is no Germany

As the cost of solar panels plummets, the price of everything else involved in getting a solar array on top of a roof is becoming a bigger part of the price tag.

These so-called soft costs include the expense of supply chains, overhead, permitting, labor, connecting to the grid and sales taxes and they haven’t dropped anywhere near as quickly as panel costs. Between 2005 and 2010 the cost of modules declined more than 40 percent, but the overall price of photovoltaic systems was down just 21 percent.

When compared with Germany – where permitting and installation is uniform – the soft costs really add up as the following graphic from the National Renewable Energy Laboratory in Golden, Colorado, shows.

[media-credit name=”NREL” align=”aligncenter” width=”495″][/media-credit] US vs. German in solar costs

Even though the costs of solar panels and inverters, the two key pieces of hardware, were higher in Germany than the U.S., the costs of everything else create an almost 50 percent increase in the price of a 5.1 kilowatt, residential rooftop array, according to the NREL analysis.

The biggest increases came in supply chain costs, electrical labor, sales tax, installer overhead and profit margins. The permitting, licensing and inspection fees are a smaller fraction of the cost, but are being targeted of the industry and public officials.

Part of the reason, say industry analysts, is that they are easy to get at and that will lead to easing some of the other costs. It is the “low hanging fruit,” said Kristen Ardani, a NREL analyst.

“There are municipalities that see this as a revenue enhancing venture,” Energy Secretary Steven Chu told the SunShot conference in Denver last June. SunShot is the Department of Energy’s initiative to reduce the cost of solar power by 75 percent between 2010 and 2020.

In 2011, Colorado adopted the Fair Permitting Act, which capped solar permit fees at $500. But some municipalities have gotten around that by charging use taxes, said Eric Wittenberg, Colorado and Texas regional vice president for national solar installer SolarCity.

The result is that permitting and licensing can in some jurisdictions add more than $2,000 to the cost of the average residential solar array, which in Colorado ranges from $12,000 to $24,000.

In an effort to tamp down those costs the Colorado Solar Industries Association, a trade group, and the Rocky Mountain Institute have launched the “Solar Friendly Communities” program seeking to get municipalities to make the process cheaper and more uniform.

Utah and Arizona are already interested in copying the program and there are hopes it can become a national model, said Neal Lurie, executive director of the Colorado solar industries association,

But if the municipal charges are such a small part of the overall soft cost why such an emphasis?

In part it is, as NREL’s Ardani said, because it is easy and while this municipal rule or that may add a few dollars to solar costs there are 18,000 municipalities with solar installation rules.

“The solar panel used in California and New Jersey but all the forms are different,” DoE’s Chu said.

“It is an impediment to the market and to market efficiency,” said NREL’s Ardani. “Supply chains issues will be addressed when the industry gets to scale, but getting to scale is the challenge.”